NOTE 16 – STOCK OPTIONS AND WARRANTS

Options

Option valuation models require the input of highly subjective assumptions. The fair value of stock-based payment awards was estimated using the Black-Scholes option model with a volatility figure derived from using the Company’s historical stock prices. The Company accounts for the expected life of options based on the contractual life of options for non-employees. For employees, the Company accounts for the expected life of options in accordance with the “simplified” method, which is used for “plain-vanilla” options, as defined in the accounting standards codification. The risk-free interest rate was determined from the implied yields of U.S. Treasury zero-coupon bonds with a remaining life consistent with the expected term of the options.

The following table summarizes the stock option activity for the nine months ended September 30, 2021:

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The aggregate intrinsic value in the preceding tables represents the total pretax intrinsic value, based on options with an exercise price less than the Company’s stock price of $2.45 as of September 30, 2021, and $3.21 as of December 31, 2020, which would have been received by the option holders had those option holders exercised their options as of that date.

The following table presents information related to stock options on September 30, 2021:

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Stock-based compensation

The Company recognizes compensation expense for all stock options granted using the fair value-based method of accounting. During the nine months ended September 30, 2021, the Company issued 9,670,216 options valued at $2.03 per option. As of September 30, 2021, the total compensation cost related to nonvested awards not yet recognized is $11,610,922 and the weighted average period over which expense is expected to be recognized in months is 29.95.

The Company calculated the fair value of options issued using the Black-Scholes option pricing model, with the following assumptions:

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The stock-based compensation expense related to option grants was $8,158,013 and $316,033, for the nine months ended September 30, 2021, and 2020, respectively.

Warrants

The following table summarizes the changes in warrants outstanding and the related prices for the shares of the Company’s common stock:

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The following table summarizes the warrant activity for the nine months ended September 30, 2021:

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The Company records all warrants granted using the fair value-based method of accounting.

On September 30, 2021, the Company, entered into securities purchase agreements with accredited investors pursuant to which the Company sold, in a private offering, 5,573,460 shares of the Company’s common stock, and warrants to purchase up to an aggregate of 6,573,460 shares of Common Stock. Each investor was entitled to purchase one share of Common Stock and one Warrant to purchase one share of Common Stock for an aggregate purchase price of $1.25. The Warrants are immediately exercisable, have a three-year term and an exercise price of $2.75 per share. The Company sold 320,000 warrants fair valued at $104,819 to a board member. The Company sold 6,253,460 shares to another investor; fair valued at $1,969,221.

During the nine months ended September 30, 2020, the Company issued 110,227 warrants in conjunction with the issues of senior secured convertible debentures in the total amount of $600,000 and recorded the allocated fair values of the warrants of $59,212 as additional debt discounts. Further, the Company issued 145,455 warrants in conjunction with the issues of related party senior secured convertible debentures in the total amount of $1,600,000 and recorded the allocated fair values of the related party warrants of $128,733 as additional related party debt discounts. The Company issued 50,000 warrants with a fair value of $82,000, as severance.

The Company calculated the fair value of warrants issued using the Black-Scholes option pricing model, with the following assumptions:

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